Sellers are finding that purchasing a home warranty is a good way to attract buyers, and buyers are finding that a warranty can save them a significant amount of money during the first few years in their new home. But sometimes home warranties can cause confusion when it comes to what is and isn't covered. Many home buyers who depend on new-home warranties are unaware of the limitations of such coverage. Typical problems, such as foundation wall cracks, basement leaks, bad wiring or faulty plumbing fixtures, are covered only during the first year. After that, coverage is usually limited to major structural defects that make the home unsafe, unsanitary or otherwise unlivable.

The Better Business Bureau (BBB) suggests that consumers who are interested in purchasing a home warranty take certain cautionary steps before signing on the dotted line.

• Verify the warranty company's track record.  Find out whether it's a local or national firm and how long it's been in business.  Contact the BBB to find trustworthy businesses.
• Do some comparison shopping. Most policies cost between $300 and $400. But not all offer the same benefits. You may find that some of the lower-priced policies charge extra for coverage of water wells and some appliances, such as washing machines and dryers.
• Consider the deductible. The industry average is $50 to $100 per claim. But some companies charge as much as $150 per call.
• Ask the company who will perform the repairs. Most warranty companies have their own network of service contractors. But some do allow you to hire a contractor of your choice. Be sure you understand the company policy before you buy the service.
• Call the warranty company before you buy a policy. Ask questions, clarify coverage and most importantly, see how the customer service representatives treat you. If they don't respond promptly and courteously before you buy a policy, odds are they won't be very helpful after the sale.
• Read the contract throughly. Make sure you fully understand what is or isn't covered.

If you have a warranty and problems show up during the first year, go directly to the warranty company. Hire an independent inspector to support your claims if you wind up in arbitration. Keep records and copies of all correspondence. Give the warranty company a reasonable opportunity to review your claims and make repairs.

We do not endorse any company in particular. It is always a good idea to check BBB ratings and make sure the company is licensed to do business in your State by contacting State Insurance Commission. Try to avoid paying annual premium and keep your cancellation rights